Save Smart. Online policies come at a discount

To encourage cashless transactions, the Centre recently announced that life and general insurance policies of the PSU insurers would be offered at a discount of 8 per cent and 10 per cent respectively if they are purchased online.

So if you plan to buy a life insurance policy, do check the premium offered by LIC and if it is a motor, health, travel or home policy, check with the four PSU insurers — New India Assurance, United India Insurance, Oriental Insurance and National Insurance — before you sign up for one.

In case of online premium payment, the servicing costs are lower and the insurance company saves on the commission it pays to its intermediaries.

The insurer partially shares its savings with the customer by lowering the premium.

In the digital space, in life insurance, term plans are most sought after; in the case of general insurance, motor, health and travel insurance dominate the list. The insurance companies offer discounts on the premium payable either based on the sum assured or on the mode of payment or both.

Higher the sum assured, higher the rebate on account of lower servicing cost.

The rebate also varies with the mode and frequency of payment.

If the frequency of premium payment is annual, then the rebate is higher; if its half-yearly or quarterly, the rebate is lesser and so on.

However, online sale of insurance policies is lower, especially in general insurance where the products are complex, says Gunjan Ghai, SVP & National Head, Brand & Marketing, SBI General Insurance.

Most general insurers do not have separate products for the online and offline customers; this is to keep their offline agents happy .

Even in life insurance, looking at the business of the state-owned Life Insurance Corporation of India (LIC), sales through the online platform is not big.

LIC has only two types of policies that are sold online — the pure-term policies and the immediate annuity plan.

Currently, LIC offers online term policies only to customers who ask for a policy with a sum assured of ₹25 lakh or above.

The carrot is that you will get a discount of 16-35 per cent (for 18-60 age group).

For instance, if your sum assured is ₹50 lakh, your premium works out to ₹7,300 (exclusive of service tax) for 30-year term for a 30-year-old male. The same policy offline will cost you ₹11,600 (exclusive of service tax).

The other product offered by LIC is the immediate annuity plan. Here you pay a minimum amount of ₹1,50,000 today and your pension starts from next month. The annuity rate is 1 per cent higher for online purchase.

Since the announcement of discounts on online purchase of insurance policies, no new policies have been launched by LIC or any general insurance player.

With LIC, however, sources within the organisation say that the insurer may consider moving those policies where premium is below a certain threshold and does not require medical tests, to the online platform for a lower premium (8 per cent discount as indicated by the government). But even after the discount, LIC’s policy may still be pricier compared to those of private insurers.

Sample this: In LIC’s Anmol Jeevan policy, for a sum assured of ₹15 lakh for a term of 15 years for a 30-year-old male, the yearly premium works out to ₹4,571 (inclusive of service tax) now, and post the discount, it will be around ₹4,113. But online policies of private insurers for the same individual will cost only ₹be Rs 3,000-3,500.

Among public general insurance companies, only New India Assurance has announced a 10 per cent discount for new customers for motor, personal accident and household insurance. This will be subject to a maximum of ₹2,000 per policy.

When all these insurance companies introduce the discount, private players may face challenges due to customer migration, particularly in travel insurance products, according to Sanjay Datta, Chief Underwriting Claims and reinsurance, ICICI Lombard, ICICI Lombard General Insurance.

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